One of my least favorite things in the financial wellness industry is how we collectively assume the surrender of a daily latte will solve financial problems. Search personal finance articles online and you are certain to find financial experts and politicians alike using this metaphorical latte to reach financial goals. As a nation we could fund Medicare or as an individual you can retire earlier! At best this comparison is a conglomerate of logical fallacies.
So, I’m here to tell you. “Drink the latte.”
I don’t mean every person in every scenario is entitled to a $5 drink/day. But, I think it’s shortsighted, out of touch, and ignorant to assume the average person is making this daily purchase in the first place. I also don’t believe in shaming a person who might splurge only on their morning coffee. If you are this latte per day drinker you just need to understand and accept the impact of this $5.
Sure, if you invested this $5/day or used it to pay off a debt you would be better served financially. Replace the latte with any other consumable and the parallel reigns true. Elimination of any spending leads us to the same place. Cut out “x” and you can have “y.” This, my friends, is the very definition of opportunity cost.
NOTE: I’m using the latte as a placeholder but it’s easily replaced by an energy drink, fast food lunch, a drink after work, etc.
Exceptions to my rule:
- You aren’t aware of how this spending impacts your bottom line. You should have a budget. You should monitor said budget. You should be aware of your overall spending and the impact of your daily coffee (or equivalent). If until right now you didn’t realize $5/day seven days a week equates to $1,825/year, you need to check in on your budget. Dining out, groceries, and entertainment should make up no more than 17% of your overall spending.
- After you examine your spending you realize you’re buying this latte on credit. A financial goal to strive toward is being completely debt free. There are certainly levels of debt different financial professionals find “acceptable.” The hierarchy of acceptable debt usually starts with a house and ends with consumables. It’s one thing to fit this expense into your budget, it’s another to buy it on credit. It’s not ok to finance your daily latte.
- You haven’t set goals to determine if you would like to use this money elsewhere. (I’m not trying to be a scapegoat for your personal responsibility.) You need goals and should be planning to achieve this goal. If this latte per day means you have to delay your retirement by a year, do you still want it? What if skipping the coffee meant you could take the vacation your mental health so desperately needs? Maybe you could be debt free sooner and that’s ultimately more important to you? Make goals and don’t just assume the latte isn’t preventing you from reaching them.
If the above do not apply to you and you understand the impact of your latte, then go enjoy it. Guilt free.